Correlation Between Eton Pharmaceuticals and Acasti Pharma

Can any of the company-specific risk be diversified away by investing in both Eton Pharmaceuticals and Acasti Pharma at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Eton Pharmaceuticals and Acasti Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eton Pharmaceuticals and Acasti Pharma, you can compare the effects of market volatilities on Eton Pharmaceuticals and Acasti Pharma and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Eton Pharmaceuticals with a short position of Acasti Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eton Pharmaceuticals and Acasti Pharma.

Diversification Opportunities for Eton Pharmaceuticals and Acasti Pharma

0.29

Correlation Coefficient

Eton Pharmaceuticals  Acasti Pharma

Modest diversification

The 3 months correlation between Eton and Acasti is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Eton Pharmaceuticals and Acasti Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acasti Pharma and Eton Pharmaceuticals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Eton Pharmaceuticals are associated (or correlated) with Acasti Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acasti Pharma has no effect on the direction of Eton Pharmaceuticals i.e., Eton Pharmaceuticals and Acasti Pharma go up and down completely randomly.

Pair Corralation between Eton Pharmaceuticals and Acasti Pharma

Given the investment horizon of 90 days Eton Pharmaceuticals is expected to generate 0.98 times more return on investment than Acasti Pharma. However, Eton Pharmaceuticals is 1.02 times less risky than Acasti Pharma. It trades about 0.03 of its potential returns per unit of risk. Acasti Pharma is currently generating about -0.01 per unit of risk. If you would invest  304.00  in Eton Pharmaceuticals on February 17, 2024 and sell it today you would earn a total of  57.00  from holding Eton Pharmaceuticals or generate 18.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Eton Pharmaceuticals  vs.  Acasti Pharma

Eton Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eton Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Acasti Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acasti Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Eton Pharmaceuticals and Acasti Pharma

The main advantage of trading using opposite Eton Pharmaceuticals and Acasti Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eton Pharmaceuticals position performs unexpectedly, Acasti Pharma can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Acasti Pharma will offset losses from the drop in Acasti Pharma's long position.

The idea behind Eton Pharmaceuticals and Acasti Pharma pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.